New network for Rockets, Astros awaits judge’s approval

Fifty-one weeks removed from their first courtroom clash over the future of Comcast SportsNet Houston, attorneys for the Astros, Rockets and Comcast will return Wednesday morning for what could be the last critical step toward the network’s demise and rebirth as Root Sports Houston.

Bankruptcy Judge Marvin Isgur will hear what is expected to be the final day of testimony regarding a plan of reorganization for Houston Regional Sports Network, CSN Houston’s parent company, that will bring CSN Houston to an end and result in layoffs for at least 96 of 141 employees.

Under the plan proposed and supported by the Astros and Rockets, the network will be sold to DirecTV and AT&T, which will add carriage on DirecTV and AT&T U-verse in addition to Comcast. The teams and Comcast will lose their equity in the network, which was valued in 2010 at $700 million, and the teams will surrender their right to immediate repayment of more than $100 million in rights fees.

Rockets soon on Root?

If Isgur, as expected, approves the plan, Root Sports Houston could be on the air Oct. 29, the first day a Rockets regular-season game will be available for local broadcast. No more than 30 to 40 percent of the 2.2 million TV households in the Houston area have had access to CSN Houston since its launch in September 2012.

Presuming Isgur approves the plan, Comcast has said it will appeal to the 5th U.S. Circuit Court of Appeals. Isgur said earlier this month he would delay the effective takeover of the network by DirecTV and AT&T to provide Comcast time to appeal.

Comcast is expected to ask the 5th Circuit to rule Isgur erred by saying Comcast’s agreement to carry the network on its cable system was of inconsequential value as of Sept. 27, 2013, when the network entered bankruptcy. Comcast claims the affiliation agreement and other assets are of sufficient value to allow for repayment of a $100 million secured loan granted the network in 2012.

Crane’s suit still active

The Astros and Rockets originally were on opposite sides of the bankruptcy struggle, with the Astros claiming the Chapter 11 case should be dismissed and the Rockets favoring reorganization, presumably via a sale to Comcast. But since Comcast announced in March it would not buy the network, the teams have cooperated in developing the proposed DirecTV/AT&T purchase.

The teams have agreed to delay receipt of past-due rights fees totaling at least $108.7 million and also will pay $8.2 million to $12.8 million in other claims so DirecTV and AT&T can receive the network free and clear. AT&T and DirecTV will invest $50 million, and the Astros and Rockets will sign new rights agreements they say will approach the approximately $100 million a year they were to receive from Comcast but will include lower escalator clauses and other changes.

Comcast will receive $9.3 million in cash, $9.4 million in accounts receivable, and $7.5 million in furniture, fixtures and equipment.

But even if the bankruptcy proceeding ends Wednesday, pending a Comcast appeal, there will be more legal proceedings. Astros owner Jim Crane’s Houston Baseball Partners ownership group filed suit last November against Comcast and former Astros owner Drayton McLane, accusing them of fraud associated with the network’s organization.

Rockets owner Leslie Alexander also was named in the suit as having been involved in a 2010 meeting at which subscriber fees for the network were set, but the Rockets were not and will not be named in the lawsuit.